Case Study 14

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Case Study 14

WHGA Partners With an Experienced Developer to Build Affordable Housing

Background:

West Harlem Group Assistance, Inc. (WHGA), one of Harlem’s oldest and largest community based development corporations, has provided low cost housing options to Harlem residents for 45 years. Founded in 1971, WHGA has converted abandoned or failed city facilities and other properties into community assets for several decades. These include low income housing, a vibrant community social services center and affordable housing for seniors. WHGA has also created and today operates five technology centers that provide local residents, including those living in homeless shelters, access to the internet.

Strategy:

One of WHGA’s development strategies is to partner with larger, more experienced real estate developers to learn how to deliver different types of affordable housing to residents as the market changes.

WHGA has had a profitable partnership with Phipps Houses, one of New York City’s oldest and most prominent non-profit developers of affordable housing, that started in the late 90s when WHGA hired Phipps to generate accurate monthly rent statements for WHGA tenants. The relationship turned to real estate development, and the two parties have partnered on ground up construction on vacant land, acquiring development sites from city agencies, housing projects funded by tax credit equity and now, housing projects made possible by acquiring air rights. Each time, Phipps has shown WHGA how each of these different types of projects are done, and WHGA can then often undertake subsequent development without Phipps’ support, said Donald Notice, WHGA’s executive director.

In 2008, WHGA created its third real estate partnership with Phipps to build 80 units of low income housing on 128th Street known as the Dempsey Apartments.

The site was the playground and parking lot of a former public school that the city Human Resources Administration controlled but it remained school property held by the Department of Education. WHGA had tried without success to persuade both city agencies to release the site for development. With Phipps as its partner, however, its relationship with the agencies got the site released, Notice said. WHGA obtained title to the site at a below market price through a sole source procurement.

Phipps also contributed equity to the project to cover pre-development costs prior to the city Department of Housing Preservation and Development funding the project. Phipps was the lead developer and now manages the Dempsey Apartments after it was placed in service in May 2011. WHGA acted as a co-developer.

Conclusion:

The total development cost for Dempsey Apartments was $26.3 million. Both WHGA and Phipps retain a 50% ownership interest in the project. This mutually-beneficial partnership structure allowed both parties to advance their missions, build their respective real estate portfolios, and offer much needed housing and services in a community of need.